- The Mexican peso remains supported by the feeling of risks.
- The confidence of American consumer rebounds in May, but the USD does not break technical resistance against the emerging market peso (EM).
- USD / MXN remains confined below resistance to the trend line at 19.29.
The Mexican peso remains firm against the US dollar (USD) on Tuesday, despite a positive relationship of confidence for American consumer and a slight recovery in the green background against its big peers.
With the call of the US dollar recently questioned, the PESO benefited from the USD outputs to alternative assets.
At the time of writing the editorial staff, the USD / MXN is negotiated nearly 19.22 with resistance to the trend line at 19.29.
American demand and feeling indicators do not increase USD / MXN
Orders of American sustainable goods for April, released at 12:30 p.m. GMT, arrived at -6.3% for April, a sharp decline compared to the reading of 7.6% of March.
While the negative impression highlights a slowdown in manufacturing demand, reading was better than market expectations of a contraction of 7.9%, the temperature of concerns concerning a higher slowdown.
The indicator follows new orders placed with American manufacturers for sustainable goods – generally those which should last three years or more – and serves as a key gauge of industrial activity and commercial investment.
Later in the day, the American Conference Board published its consumer confidence index for May, which showed an impressive recovery at 98, against 86 in April.
Despite the data providing a certain relief concerning the health of the American economy, it has not triggered a wave in the US dollar.
Fed Kashkari urges patience, emphasizing the uncertainty of economic shocks
Neel Kashkari, president of the Federal Bank of the Reserve (Fed) in Minneapolis, gave a temporary increase in confidence on Tuesday. Speaking at the top of Tokyo, where bankers, decision -makers and economists gathered to discuss monetary policy, he maintained a bellicist tone.
To conclude his speech, Kashkari said that “massive shocks create uncertainty for political decision-makers, both to understand the underlying dynamics of the shocks themselves and, for certain shocks, to determine the appropriate political response. In such moments, take the time to obtain more information to help inform the collective judgments of federal decision-makers of the Federal Bank Federal.
These comments reiterate the Fed's account that interest rates will probably remain at the current levels until the impact of US President Trump's prices on the economy becomes clearer.
Mexican peso daily digest: FOMC Minutes Focus
- The Fed reiterating its “data dependent” position, orders for American goods have provided a mixed signal concerning the strength of American industrial activity.
- Following a significant drop in consumer confidence at 86.0 in April, the latest data offers an overview of how American households react to increased budgetary uncertainty and global geopolitical tensions.
- On Wednesday, the minutes of the meeting of the Federal Committee of Open Markets of the May Reserve (FOMC) will provide an additional overview of the Central Bank's decision to maintain interest rates at the current levels and the potential trajectory of the short-term monetary policy.
- Market players are waiting for the publication of the FED's privileged inflation measure, which is the American data for personal consumption expenditure (PCE) for April, as well as the figures for feelings of consumers of the University of Michigan, both scheduled for Friday.
- These data points are crucial to understanding the inflation and feeling of consumers, because they assess the feelings of American citizens about the current economic situation. The two factors influence expectations concerning the moment when the Federal Reserve (Fed) could consider reducing interest rates.
Technical analysis of Mexican Peso: USD / MXN trips are lower after rejection of resistance to the trend line
USD / MXN continues to be negotiated in a downward trend, with prices capped under the simple 10 -day mobile average (SMA) at 19.33.
After reaching a new hollow of the year (YTD) of 19.20 on Monday, a modest rebound in the US dollar pushed the pair in the line resistance from April to 19.29.
Momentum indicators remain low, with the relative resistance index (RSI) flattening at 36.47, indicating that although the lower momentum is present, the market is not yet in territory occurring.
With the right -down tendency currently intact, a breakdown of less than 19.20 could draw attention to the hollow of October to 19.11, which serves as an next level of significant support.
A break -up below this level could open the door to deeper drops around 19.00, while any rebound should first recover 19.47 to change the short -term feeling.
USD / MXN every day chart
Central Banks FAQ
Central banks have a key mandate that ensures that there is price stability in a country or region. The savings are constantly faced with inflation or deflation when the prices of certain goods and services fluctuate. The constant increase in prices for the same goods means inflation, the constant prices lowered for the same goods mean deflation. It is the task of the central bank to maintain demand online by refining its policy rate. For the largest central banks such as the American Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BOE), the mandate is to maintain inflation close to 2%.
A central bank has an important tool at its disposal to increase higher or lower inflation, and it is by refining its rate of reference policy, commonly known as interest rate. On pre-communicated moments, the Central Bank will publish a declaration with its policy rate and provide additional reasoning on the reasons why it is left or changed (hiking). Local banks will adjust their savings rates and their loan rates accordingly, which in turn will make people more difficult or easier for people to gain on their savings or for companies to contract loans and invest in their business. When the central bank considerably increases interest rates, this is called monetary tightening. When it reduces its reference rate, monetary softening is called.
A central bank is often politically independent. The members of the Central Bank Policy Board are going through a series of panels and audiences before being appointed to a seat of the board of directors. Each member of this council often has a certain conviction on how the central bank should control inflation and subsequent monetary policy. Members who wish a very loose monetary policy, with low levels and cheap loans, to considerably stimulate the economy while being contained to see inflation slightly greater than 2%, are called “doves”. Members who want to see higher rates to reward savings and want to keep an allusion to inflation at any time are called “hawks” and will not rest until inflation is below 2%.
Normally, there is a president or a president who directs each meeting, must create a consensus between the hawks or the doves and has his last word to be summed up in a vote to avoid equality of 50-50 on the fact that the current policy is adjusted. The President will pronounce speeches which can often be followed live, where the position and the current monetary perspectives are communicated. A central bank will try to advance its monetary policy without triggering violent fluctuations in rates, actions or its currency. All members of the central bank will channel their position towards the markets before a political meeting event. A few days before a political meeting takes place until the new policy is communicated, members are prohibited from speaking publicly. This is called the electricity period.
